China Eximbank provides $20.08 million preferential buyer’s credit for 67km Tosontsengel-Uliastai Road Construction Project (Linked to Record ID#40435)

Project narrative

On May 31, 2006, the Mongolian Parliament provided in-principle approval to the Ministry of Finance to borrow $500 million from China Eximbank. Then, on June 16, 2011, China Eximbank and the Government of Mongolia signed a general loan agreement regarding the utilization of a $500 million preferential buyer's credit (PBC) for various projects (see Umbrella Record ID#40435). Under the terms of the general loan agreement, all subsidiary (individual) loan agreements for specific projects carry identical borrowing terms: a 20-year maturity, a 7-year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.25% commitment fee, and a 0% management fee. Nearly seven years later, on September 17, 2018, U.Enkhtuvshin, Deputy Prime Minister of Mongolia, and Zhong Shan, Commerce Minister of China, signed a subsidiary China Eximbank loan (PBC) agreement [CHINA EXIMBANK PBC 2018 (22) TOTAL NO. (479)] worth $20,089,779.69 for the 67 km Tosontsengel-Uliastai Road Construction Project. The proceeds of the PBC were to be used by the borrower to finance 100% of the $20,089,779.69 cost of a commercial contract [contract number 31 and project number ABZ-2018] between Mongolia’s Ministry of Road and Transportation and China Communications Construction Company, Ltd. (CCCC), which was signed on March 12, 2018. The purpose of the project is to construct a 67 km paved road between Tosontsengel and Uliastai. Upon completion, the road will connect the center of Zavkhan aimag with the capital city and pass through Zagastai pass, a difficult pass of the Tarvagatai mountain range. The project has two components: a 28.11 km stretch road known as PK0 + 000-PK28 + 110 and 36.37 km stretch of road known as PK28 + 110-PK64 + 480. China Communications Construction Company, Ltd. (CCCC), Arj Road LLC and Tum Arvijikh LLC are the contractors responsible for project implementation. A protocol agreement on the project was signed on August 30, 2016. Land acquisition issues were subsequently addressed through a government resolution that was issued on May 2, 2017. Project implementation was originally expected to commence in 2018. It was not until June 7, 2019 that the contractors were given permission to begin construction. Construction activities began in July 2019. As of November 15, 2019, the project had achieved a 34.5% completion rate. As of May 21, the project had achieved a 76.5% completion rate. As of August 27, 2021, the project had achieved a 98% completion rate. The project was ultimately completed on June 27, 2022. The project’s originally scheduled completion date was October 30, 2020. Implementation delays resulted from unresolved funding issues for the project's supervisory consulting services.